11/20/2003 @ 6:30PM

Pay Vs. Player Performance

While
Cablevision Systems
struggles with continued losses and accusations of accounting irregularities, fans of its hockey team, the New York Rangers, have their own struggle: how to root for a team that has missed the playoffs six straight years despite consistently spending the most on players. Fueled in part by rich sponsorship deals with
American Express
,
Anheuser-Busch
and
Nextel Communications
, the Rangers spent a National Hockey League record $79 million last season including bonuses and benefits, yet finished the season with the 21st best record. Missing the playoffs six straight years is hard to do in a league where 16 of the 30 teams qualify for a chance to win the Stanley Cup.

Meanwhile the small market Ottawa Senators, recently acquired by
Biovail
founder and CEO
Eugene
Melnyk
Eugene Melnyk
, had the NHL’s best record last season and made it to the semifinals of the playoffs. Led by goalie Patrick Lalime and winger Marian Hossa, the Senators were able to win despite a player budget of $35 million, more than 50% below that of the Rangers.

In order to compare how vastly different the pay versus performance was for the Rangers and Senators, Forbes developed the Team Relative Productivity Score. It looks at the number of wins per player payroll relative to the rest of the NHL. Playoff wins are counted twice as heavily and ties are counted half as much. The Rangers score of 42 means that the team achieved 58% fewer victories per dollar of payroll compared with the league average. The Senators on the other hand had a TRPS of 201, meaning the team performed better than twice the league average when it came to pay versus performance.

Bang For The Buck

A look at the best and worst NHL teams in terms of their performance versus their player costs.

*Team Relative Productivity Score compares the number of wins per player payroll relative to the rest of the NHL. A score of 120 means that the team achieved 20% more victories per dollar of payroll compared with the league average. TRPSs are for the 2002-2003 season.

Team

TRPS*

Team

TRPS*

Ottawa Senators

201

New York Rangers

42

Minnesota Wild

199

Carolina Hurricanes

66

Tampa Bay Lightning

154

Detroit Red Wings

68

Vancouver Canucks

154

Montreal Canadiens

68

Mighty Ducks of Anaheim

149

San Jose Sharks

71

Beyond bumping up your TRPS, making the playoffs in hockey is more critical than in any of the other major sports from a revenue standpoint because almost all of the gate receipts go to the team. In baseball, football and basketball, the league takes a huge chunk of the ticket revenue. During their 2001-2002 Stanley Cup run, the Detroit Red Wings generated over $30 million in ticket revenue because of skyrocketing prices and sold out arenas. Most of this money falls to the bottom line as a team’s biggest expense, player costs, are paid off during the regular season. If a team can make the playoffs with a low payroll, it’s almost guaranteed to turn a profit. The Minnesota Wild is the poster team for this. Their formula last year: Host eight playoff games and have the NHL’s lowest player costs at $28 million. The result: The Wild was the league’s most profitable team at $20 million before interest, taxes and depreciation.

According to Gordon Saint-Denis, who founded sports valuation firm Triton Sports Associates, looking at the ratio of player costs and performance “is something that is very important when we value franchises. It’s an indication of management’s strength.”

If that is the case, Cablevision
might want to start looking for new management.